September 30, 2016 / 14:39 IST
Motilal Oswal's research report on MCX
The Securities and Exchange Board of India (SEBI) released a circular ratifying the introduction of options in the commodities derivatives market. According to the circular, exchanges willing to start trading options shall take prior SEBI approval. That would be procedural for MCX, in our view. The circular does not mention which commodities are allowed, nor does it indicate the date from when options contracts can start trading. The SEBI will issue detailed guidelines in due course.
MCX has retained its market leadership position with a share of 80-90% over FY09-16, even in the most turbulent of months of FY13-14, when the parent’s existence was in deep waters on issues of fraud around National Spot Exchange. With the SEBI’s reforms underway, our base case assumes a return to pre-commodities transaction tax (CTT) average daily turnover of INR500b by end-FY18. This compares with current ADT of INR 250b. Our price target is INR 1,400, which discounts forward earnings by 30x. Buy.
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